Jordan to import LNG as Arab Gas Pipeline fails to deliver

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Jordan is set to become an LNG importer from 2015, following the agreement of a ten-year time charter for a floating storage and regasification unit (FSRU) with Golar LNG. The agreement comes none too soon for a country that has found itself having to spend much more than expected on electricity generation because of a major gas shortage. This has meant it has had to turn to expensive oil products such as fuel oil and gasoil to meet electricity demand.

The Golar Eskimo – an FSRU currently under construction at Samsung Heavy Industries’ shipyard at Geoje Island in South Korea (see photo above) – will be moored at a purpose-built structure to be constructed by the Aqaba Development Corporation off the Red Sea port of Aqaba.

Capable of storing 160,000 cubic metres of LNG and delivering up to 500 MMcf/d of natural gas, with a peaking capacity of 750 MMcf/d, the FSRU will connect to the Jordan Gas Transmission Pipeline that delivers natural gas to power plants throughout the kingdom.

Jordan’s natural gas industry was founded on the basis of cheap gas imports from Egypt through the Arab Gas Pipeline (AGP), of which the Jordan Gas Transmission Pipeline – the backbone of Jordan’s gas pipeline network – was the second phase. However, in recent years supplies have been increasingly erratic because of multiple sabotage attacks on the pipeline, which have become more and more frequent since the Arab Spring revolution in Egypt.

Map of Arab Gas pipeline from Egypt through Syria to Turkey to FSRU at Aqaba

 

 

 

 

 

 

 

 

 

THE ARAB GAS PIPELINE – Jordan has been short of gas because of dwindling supplies from Egypt through the Arab Gas Pipeline, of which the Jordan Gas Transmission Pipeline was the second phase. The new FSRU will be located at the Red Sea port of Aqaba.

Moreover, Egypt is now suffering a major shortage of natural gas itself and supplies through the AGP have been severely curtailed, even during periods when the pipeline is operational. The AGP began operations in 2003 and supplies through the line climbed steadily to peak at 310 MMcf/d in 2009, according to data published by the Jordanian-Egyptian Fajr Company. Since then supply volumes have been falling and by early this year had dwindled to less than 40 MMcf/d, according to local media reports.

Under the FSRU contract agreed with the Ministry of Energy and Mineral Resources on 31 July, annual EBITDA contribution to Golar will be around $46 million for the first five years and around $43 million for the following five years. Earnings are due to commence during the first quarter of 2015. The government has the option to terminate the time charter after year five, subject to payment of an early termination fee.

Jordan has yet to arrange LNG supply for the FSRU. According to Trower & Hamlins, a legal firm that has been advising the Jordanian government on implementation of its LNG import strategy, the government plans to secure supply through a tender. “A preferred bidder for the LNG supply tender is expected to be appointed in the final quarter of 2013,” says the firm.

Floating regasification has been growing in popularity since the first FSRU entered service in 2005. According to Golar LNG, one of the three main suppliers, “half of all new LNG import markets since 2005 have chosen FSRUs over land-based facilities”.

The projects are generally cheaper and quicker to construct than land-based terminals and have generally been regarded as a quick and cost-effective bridging solution while an onshore regas project is implemented. However, the main suppliers, which include Excelerate Energy and Höegh LNG, are now claiming that the latest FSRUs are a realistic and competitive alternative to land-based projects.

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